ERISA-Third Circuit Rules That Annual Installment Payments of Withdrawal Liability Are Computed At The Single Highest Contribution Rate Under The Governing CBAs, But Does Not Include The ERISA 10% Surcharge

In Board of Trustees of the IBT Local 863 Pension Fund v. C & S Wholesale Grocers, Inc. /Woodbridge Logistics LLC, Nos. 14-1956 and 14-1957 (3rd Cir. 2015), a disagreement arose between C&S Wholesale Grocers, Inc./Woodbridge Logistics LLC (“Woodbridge”) and the Board of Trustees of the IBT Local 863 Pension Fund (“the Board”) about the amount that Woodbridge should pay annually after withdrawing from the IBT Local 363 Pension Fund (the “Fund”) in 2011. At the time of its withdrawal from the Fund, Woodbridge was the largest wholesale grocery distributor by revenue in the United States. The Board administers the Fund, which is a multiemployer pension plan subject to the provisions of ERISA. Before withdrawing from the Fund, Woodbridge had been contributing to it pursuant to three collective bargaining agreements (“CBAs”).

The parties here agree that the total amount that Woodbridge owes, as withdrawal liability under ERISA, is $189,606,875. Because Woodbridge has elected to satisfy this liability through annual payments instead of a lump sum, the amount of those payments is at the heart of this dispute. One of the provisions of ERISA, 29 U.S.C. § 1399(c)(1)(C)(i), provides that the annual payments must be based on the “the highest contribution rate at which the employer had an obligation to contribute under the plan. . . .” In applying this provision, the Board seeks to select the single highest rate from the multiple contribution rates established in the three CBAs under which Woodbridge was contributing to the Fund. Woodbridge contends that it is responsible only for a weighted average of all of the contribution rates it is obligated to pay under the CBAs. The second point of disagreement is whether Woodbridge’s annual payment should include a 10 percent surcharge that Woodbridge had been paying pursuant to ERISA under 29 U.S.C. § 1085(e)(7)(A) before withdrawing from the Fund. The Board claims this surcharge should be included in the annual payment that Woodbridge owes. Woodbridge disagrees.

After reviewing the case, the Third Circuit Court of Appeals held that: (1) the “highest contribution” rate means the single highest contribution rate established under any of the three CBAs, and (2) the annual payment does not include the 10 percent surcharge.

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